Decision to Adjudicate: Coega Development Corporation vs Mail &Guardian

SUMMARY

The headlines to the stories in dispute read, Hawks probe R11m hospital fraud – The Eastern Cape health department is accused of diverting money meant for clinic (published on 18 April 2019); and, Riddle of the R111m Coega deal – A panel member who approved diverting health department funds has denied a conflict of interest (published on 26 April 2019).

This ruling by Press Ombud Pippa Green was based on the Press Code that was in effect before 30 September 2022.

 

The first story was about the Hawks who were investigating an alleged fraudulent payout of more than R110-milion by the Eastern Cape health department. The money, desperately needed by hospitals and clinics, apparently found its way into the pockets of senior ANC officials in the province. The introductory sentence to the second article read, “At the centre of the R111-million paid by the Eastern Cape Health Department to the Coega Development Corporation is an arbitrator who scored multimillion-rand contracts from the corporation.”

Green said as she had begun working on this complaint, she had been informed that the complainant had instituted legal proceedings against the M&G. She noted that the Press Code was clear on this point, saying that where it emerged that “proceedings before a court are pending on a matter related to the material complained about,” the Press Council proceedings “shall forthwith stop”.

The Ombud declined to adjudicate this complaint while the legal action brought by the complainant was pending.

 

THE RULING ITSELF

Decision to adjudicate

Complaint number 4381: Coega Development Corporation (Dr Ayanda Vilakazi) vs Mail&Guardian

Date of articles:  April 18, 2019 and April 26, 2019

1. Complaint

1.1 This case arises out of two stories published in the Mail&Guardian on April 18, 2019 and April 26, 2019.

1.2 The author of both stories was Thanduxolo Jika.

1.3 The headline of the first story was “Hawks probe R11m hospital fraud” and of the second “Riddle of the R11m Coega deal.”

1.4 Dr Ayanda Vilakazi on behalf of the CDC has made the complaint and asked the Ombudsman to adjudicate.

He complains that both articles were “inaccurate, misleading and unfair”.

2. The articles

2.1 The first article appeared under the headline “Hawks probe R11m hospital fraud”, with the sub-head “The Eastern Cape health department is accused of diverting money meant for clinic.””

2.2 The introduction to the first article states: “The Hawks are investigating an alleged fraudulent payout of more than R110-milion by the Eastern Cape health department. The money, desperately needed by hospitals and clinics, apparently found its way into the pockets of senior ANC officials in the province.”

2.3 The story’s main source appears to be former health department official, Mlamli Tuswa, who says “his attempts to raise the alarm about this irregular payment were ignored.”

It cites an affidavit he submitted to the Hawks in the previous month, in which he claims that the Coega Development Corporation (the CDC) was paid R111-million “in management fees without any service level agreement” by the provincial department of health. He also claimed a “number” of ANC politicians and members of the legislature were “lobbied” to secure the payment.

2.4 The Eastern Cape Hawks spokesperson, Anelisa Feni, confirmed they are investigating the allegations.

2.5 Mr Tuswa further claimed that the department diverted funds meant for 38 urgent projects at hospitals and clinics. The report says documents attached to the affidavit showed he had warned the department about this in September 2018.

2.6 The CDC was appointed by the health department as its “implementing agent” in managing construction and maintenance of hospitals.

2.7 The article also reports that Mr Tuswa “wants the Hawks to investigate Coega’s bank accounts because he believes that some of the money might have found its way into the pockets of some influential people in the Eastern Cape.”

2.8 The money “is said to be” part of a R150-million payment that was paid to the CDC “as the result of an arbitration award” in 2018 “after a drawn-out battle” between the health department and the entity.

It quotes Mr Tuswa again about his belief that some of this money “landed in the pockets” of some provincial politicians.

2.9 About halfway through the article, there is a paragraph that states that Mr Tuswa was fired from the provincial health department earlier in the year “after an internal disciplinary hearing”. It also reports that his “advice to review the arbitrators’ decision was ignored.”

2.10 The matter went to arbitration after a dispute about the methods of calculation for the payment between the health department and the CDC.

The article quotes the office of CDC CEO Mninawe Silinga to say it had “provided the evidence required by the arbitrators” for the payment.

2.11 However, Mr Tuswa claimed the arbitration process was “flawed” and “clearly wrong”. He said the CDC had submitted its claim using a “non-existent service-level agreement”. He also claimed the “value of the fees way exceeds what is possible”  in terms of time-based work.

2.12 The article carries a denial of the claims by the CDC, saying the payments were done in line with management fees prescribed by the department of public service and administration.

2.13 The last paragraph of the article reports an article in the EP Herald that Mr Tuswa (the main source of the story through his affidavit) was “fired for [allegedly] soliciting a bribe, arranging a R30 000 salary for a friend in exchange for Coega tenders and paying one company exorbitant rates to change light bulbs at health facilities in the province”.

2.14 The second article in this series ran under the headline, “Riddle of the R111m Coega deal”. It carries a subhead that says: “A panel member who approved diverting health department funds has denied a conflict of interest.”

2.15 The introduction states: “At the centre of the R111-million paid by the Eastern Cape Health Department to the Coega Development Corporation is an arbitrator who scored multimillion-rand contracts from the corporation.”

2.16 The second paragraph cites the affidavit to the Hawks (mentioned above) by Mr Tuswa as the source for the introductory statement in the article.

2.17 It then says the M&G has “established’ that one of the arbitrators who decided that the provincial health department should pay the CDC R150-million “had previously got lucrative contracts from the state-owned company.”

2.18 It cites “documents” that show that Mr Riddle’s company, Omega Civils, had been awarded two contracts in 2015 – one for close to R15-million for civil engineering work and the other for R50-million to “maintain roads and stormwater infrastructure.”

2.19 It quotes Mr Riddle’s denial of this, saying there were no contracts in place at the time he served on the arbitration panel. “There were no contracts pending. Those that may or may not have happened were in the past.”

2.20 The R111 million was “reportedly an irregular portion of the R150-million paid to the CDC” in 2018 “after a drawn-out battle” between the entity and the health department that began in 2015.

2.21 The CDC and the health department then agreed on an arbitration process.

It quotes Mr Tuswa’s allegation that the CDC was “allowed to handpick arbitration panel members”, a claim the CDC denied, saying there was no conflict of interests and that no “panelists had conducted business with the state-owned company.”

2.22 It reports that the M&G had identified two contracts awarded to Omega Civils, and cites the contract numbers, in January and July 2015.

2.23 It then quotes Dr Ayanda Vilakazi of the CDC: “In the agreement, the parties agreed that the tribunal would be constituted of professionals from three disciplines – a professional engineer, a professional quantity surveyor and a chartered accountant. To ensure transparency and credibility of the process, independent professional associations did the appointment of the arbitrators. The CEO had no involvement in the process. There was no communication at all between the CEO and the appointment bodies…It is important to note none of the arbitrators declared any conflict of interests.”

2.24 Dr Vilakazi said the arbitrators were appointed by the Association of Arbitrators and the SA Institute of Chartered Accountants

2.24 Dr Vilakazi also said it was “factually incorrect” that Mr Riddle “scored multimillion-rand contracts with the CDC.”

He also said the “construction of miscellaneous civil engineering works” contract had been “inherited” from the Nelson Mandela Bay municipality and denied that the CDC had awarded another contract to Omega Civils.

2.25 The article also quotes health superintendent-general Dr Thobile Mbengashe, saying the National Prosecuting Authority had “approached” the health department legal department and added  “there was no evidence that any arbitrators had a conflict of interest and that the panel favoured the CDC.”

He also said the department would “validate” all claims.

2.26 It then cites Mr Tuswa again (at this stage it mentions he was fired after being found guilty in an internal disciplinary hearing ), saying the department had “diverted funds intended for 38 urgent projects at hospitals and clinics, scheduled for the 2018-19 financial year” to pay the CDC bill.

2.27 It repeats the claim made in the first article that the “money may have found its way into ANC politicians’ pockets in the province and that Omega Civils may have been used to disperse the funds.” It reports that Omega Civils went under voluntary liquidation in January (2019).

2.28 It quotes another newspaper, the Weekend Post, saying the Nelson Mandela Bay municipality had cancelled its contract with Omega Civils (to surface gravel roads) “because of poor performance.”

2.29 It also quotes the Eastern Cape provincial ANC secretary Lulama Ngcukayitobi saying the ANC rejected the claims made by Mr Tuswa and had committed itself to fight corruption in the province. She also said: “The courageous action taken by (the) health department against Mr Tuswa must be emulated by various organs of government so it can clean itself of its bad image.”

3. The Arguments

3.1 The CDC’s Dr Ayanda Vilakazi filed a detailed complaint and responded to my further questions. The M&G initially responded to the complaint, defending its reporting. The arguments were in respect of both stories.

3.2 Dr Vilakazi addressed himself to both articles summarized above. This included lists of the meetings the CDC has attended with various arms of government to resolve the dispute over payment. It also, in respect of the second article, spelled out the process taken to appoint the arbitration panel.

3.3 He provided contract numbers to show the work undertaken by Omega Civils for the Nelson Mandela Bay municipality, and its completion date.

He also said the CDC Board had requested its Audit and Risk committee to commission an independent enquiry into Mr Tuswa’s allegations.

3.4 The M&G, for its part, defended the reports saying it was based on the Hawks investigation and that the CDC’s rebuttal of Mr Tuswa’s allegations were reflected in the article. It argued that Mr Riddle was mentioned “by name” in Mr Tuswa’s affidavit.

3.5 Beauregard Tromp, on behalf of the newspaper, also said the CDC’s detailed responses were not carried in full in the articles but the newspaper “faithfully” reflected an “abbreviated” version. However, the CDC was also afforded space in the online version of the newspaper to express its views more fully.

4. Legal proceedings

4.1 As I began working on this complaint and contacted the two parties for further clarifications, I was informed by the M&G’s Mr Tromp that Mr Stuart Riddle, who features prominently in the second article, had instituted legal proceedings against the M&G.

4.2 Mr Riddle is the arbitrator accused in the article of “scor(ing) multimillion-rand contracts” from the CDC.

4.3 The case  (2366/19) is set down to be heard in the Eastern Cape High Court (Port Elizabeth).

4.4 The papers filed by the plaintiff (Mr Riddle) include a “Notice of Discovery” application which asks the court to order the disclosure of documents and tape recordings mentioned in the M&G article.

4.5 The Complaints Procedure in the Press Code, clause 1.7, state the following:

“1.7 Where at any stage of the proceedings it emerges that proceedings before a court are pending on a matter related to the material complained about, the Public Advocate, the Ombud or the Chair of Appeals, depending on the status of the complaint at that stage, shall forthwith stop the proceedings and set aside the acceptance of the company…unless it is shown that the issue complained about is not among those the court is adjudicating,”

4.6 Although Dr Vilakazi of the CDC put it to me, when I pointed this out, that in this case the CDC and not Mr Riddle, is the complainant, I feel that any adjudication of the story, which would also involve clarifying and establishing certain factual matters, would involve matters on which proceedings before a court are pending.

4.7 The newspaper and the CDC have put distinctly different facts on the table and any adjudication would have involved some attempt to ascertain those contested points.

4.8 I had considered adjudicating the first article,  “Hawks probe R111m hospital fraud” (summarized above) and declining to adjudicate the second, “Riddle of the R111m Coega deal” (also summarized above).

4.9 However, the two articles are essentially intertwined. The first article goes into some detail of the arbitration process, which was reported on in more detail in the second.

4.10 One of Mr Tuswa’s allegations, recorded in the first article, was that he “advised” the department of health to review the arbitrator’s award because he believed it was flawed, and “clearly wrong.”

4.11 The second article, which mentions Mr Riddle as one of the arbitrators, goes into some detail about allegations that he had “scored multimillion-rand contracts with the CDC.”

4.12 So it became impossible for me to adjudicate one article without straying over, as it were, into the territory of the second.

4.13 The second argument pertaining to adjudication is whether it makes a difference that the CDC, and not Mr Riddle, is the complainant.

4.14 I am sympathetic to Dr Vilakazi’s view here especially given the time and trouble he has taken to put the corporation’s position before the Ombud.

The problem is though, as mentioned above, any adjudication I may make even if only restricted to the first article, will have to include some investigation about the arbitration process, and this may well be on matters on which proceedings before a court are pending.

4.15 The Press Code is very clear on this point, saying that where it emerges that “proceedings before a court are pending on a matter related to the material complained about,” the Press Council proceedings “shall forthwith stop.” (My emphasis.)

Mr Riddle’s matter is inextricably “related to the material complained about”.

4.16 Thus I must decline to adjudicate this complaint while the legal action brought by Mr Riddle is pending.

Appeals Procedure

The Press Council’s Complaints Procedure, clause 1.8, stipulates that if either party is not satisfied with the Ombud’s decision to decline to adjudicate, they may appeal to the Chair of the Appeals panel, Judge Ngoepe within 7 working days. He can be reached at [email protected]

Pippa Green

Press Ombudsman

April 14, 2020